RISKY BUSINESS: Minimizing insurance premiums is a matter of commitment, consistence and vigilance

speeding truckHow can you keep your insurance premiums as low as possible? Run a safe and efficient operation, pay attention to the little things, hire well, and do what you say you will.

That’s the advice from Barry Peabody, Cargo Secure specialist with SGI CANADA, whose guidance starts with this tongue-in-cheek bit of common sense: “Stay out of the ditch!” Perhaps less obvious, but just as important, is his advice to concentrate on how you operate your business and to make your insurance broker a partner. Insurance brokers have their fingers on the pulse of the industry and can show you things that can help control insurance costs.

Take staffing, for example. “We’re spending more time talking to our carriers about things like how they hire — what type of due diligence do they do,” Peabody said, pointing to things such as checking drivers’ references. “If (your recruit) has driven for two or three other companies, give them a call and find out what they say about him. Why is he leaving? Is he not getting the miles he wants, does he want to be home on the weekends, (are they) glad he’s gone? What’s the story?”

This is one of the strategies used by Rosenau Transport, a family-owned business with terminals across Saskatchewan, Alberta, and the B.C. interior. “We…have very stringent hiring practices,” Saskatoon terminal manager Tim Rosenau says, noting “we’ve got drug screening, we’ve got low tolerance on moving violations.” Rosenau credits this and other practices for contributing to what he says are rates that have been stable over the past decade or so, despite the company having grown substantially.

Jennifer Singer, who runs Calgary’s Demon Water Hauling, agrees. “You have to do reference checks, look at their past employers and the time they’ve spent at these employers,” she said, “and then you send them for different tickets – WHMIS, first aid, etc.”

Bob Hill, of Hill Bros Expressways, echoed the sentiment, saying his company also has “very strict policies in regards to hiring and safety and as such we have a very good premium.”
Yet many carriers don’t do such due diligence.

“I understand that everyone is very busy these days and there’s lots of processes and demands and deadlines and things slip through the cracks,” Peabody said, “but a lot of times it’s the little things that really can come back and bite you.” He mentioned a client carrier who would take his recruits on a road drive with him, “just (for) a casual chat, see what his driving habits are like. See if he’s courteous on the highway, if he rolls through stop signs, what his S turns are like — is he running over curbs?” That may take up your valuable time, but Peabody said it gives you “a sense of what you’re getting. And if he’s not great when he’s on his best behavior, can you imagine what he’s going to be like when he’s a thousand miles away from home?”

Rosenau Transport is not only picky about whom it hires, it backs its drivers up with good working conditions. “We’ve spent millions on modern and new equipment which we feel should attract the crème de la crème, the better drivers,” Rosenau said. “Good equipment should attract good drivers, and good drivers deserve good equipment. We could order trailers that cost $23,000 but we end up paying $27-29,000, we put on the super singles, we put on the air management systems for the tire inflation, the skirts for fuel economy, the disc brakes.”

Singer also recommends treating your employees right. “If you talk to your employees one-on-one every day, they care more,” she said, “they’re willing to do a better job for you.” She noted that Demon also has a safety and performance bonus plan for its people.

Beyond hiring, Peabody said one of the best things you can do is to set – and maintain – high performance standards for your company. “You have to walk the walk,” he said. This means having written policies in place that address everything from drugs and alcohol, logbook infractions and moving violations to talking and driving or texting while driving. “Make sure you’ve got a formal policy in place to ensure everybody’s on the same page about what you will accept and what you will not accept,” he said. “Have formal incident reporting processes and make sure (they) address who, what, when, where and why.”

Peabody said you shouldn’t just write things down in books, either; you must live them. “Where the savings come in on insurance costs is in your day-to-day operations, the things you do when people aren’t looking,” he said. “Have regular safety meetings and reward the folks that are doing extraordinarily good jobs for you. All that adds up to lower costs.” He advises keeping a paper trail so your insurance partners can see that you’re doing what you claim.

And get your drivers more involved in their loads. “Their job responsibility’s not only safe operating on the streets and arriving on time and meeting all the conditions and requirements,” Peabody said. “You also need them there to supervise the loading and the unloading of your trailer, actually being aware of what’s going on and protecting your interests — especially if you’re an owner operator.” He said that if you aren’t paying attention, you can be held responsible and your insurance costs “will start to creep up.”

Singer noted that all of Demon’s vehicles have a disposable camera and a notepad on board “so the driver can write down all the information – plate, VIN number, all that kind of stuff – if there’s an incident to make sure that all the information is taken down at that time.” Having a camera on hand – even on the driver’s cell phone – could also help ensure you have evidence in any damage or shortage issues between shipping company and receiver.

It can be hard to have a paper trail if you’re just a startup, but Peabody said that doesn’t necessarily mean you’ll be paying high premiums through the proboscis until you have a track record. “A number of underwriters nowadays are asking companies if they have written procedures, what their claim circumstances are,” he said, “and if you have some policies in place that you can share with the underwriter, that gives them a sense of confidence that at least — even on day one of your operation — you’ve put some thought into what happens when you’re rolling down the highway.” He noted that as a business gets more experienced, those rules will undoubtedly change and evolve, but “even for a brand-new operation, put some thought into it, and then share that information,” he said.

Murphy’s Law is still in force, however, and sometimes stuff happens.

Peabody advises that if you’ve made mistakes that could lead to higher premiums, “have your broker over to review your operation and talk about some of the changes you’re contemplating. Bounce them off your broker, get a sense which ones will resonate with underwriters and which ones will not.” Brokers, he said, will come up with suggestions for how you can manage risk better, including opting for higher deductibles “to assume more of the risk yourself, to prove to the underwriter that you’ve got skin in the game. If you’re looking for just a low deductible, you really don’t have much to risk.”

Rosenau agrees. “What we’ve done is we’ve taken on a higher deductible, made ourselves more responsible for the damage we do to our vehicles,” he said, noting that the company also has “a risk manager in Carl Cave, who has 25 years experience with insurance and claims adjusting to help prevent issues. All this stuff makes it very attractive for insurance companies, when you buy into it both with policies and procedures and back it up with equipment.”

It might also help to choose your claims wisely. “You need to decide if it’s better to claim or to pay it out,” Singer said. “Weigh the pros and the cons of paying. If it really, truly isn’t your fault, then fine, but decide if it’s better to take the hit now or let the insurance company deal with it.”

Even if you’ve had a couple of claims, your premiums won’t necessarily skyrocket. “What’s best is to do a review after post mortem on every claim and look at what you could have done differently,” Peabody said. “Again, bounce the scenario off your insurance broker; see if they can provide you any guidance. Cargo Secure, for example, is a product that has broad coverage for all kinds of scenarios you may not have considered.” At the end of the day, if there’s nothing you could’ve done differently – and your broker agrees with you – chances are “that type of claim is not going to affect your pricing as much as you might think. It’s why you buy insurance in the first place.”

But if there’s something you could’ve done, “own up to it and try to fix it,” Peabody said. “If you’ve had one or two or a few bad years, face it, talk it through with your insurance advisors and see if you can figure out a strategy.” He said underwriters are happy to see customers trying to find solutions, because “that’s what the underwriter is trying to do, too. Increasing premiums is not necessarily an underwriter’s first decision; they’re happier finding ways to improve a bad situation. You save money and the insurance company stakeholders make more money if losses just don’t happen, so that’s obviously the first line of defense.”
Hill noted that companies can be their own worst enemies when it comes to walking the talk. “I look in some of the trucking yards and see all of their severely damaged trucks lined up against the back fence and I laugh,” he said. “I also ask myself what insurance company would insure these types of companies?”

Brokers can also be excellent learning resources, whether you’re a new or a veteran operator. “There’s risk managers that insurance companies have, there’s lots of claims people you can talk scenarios through,” Peabody said. “There’s all types resources available – what you need to keep your records straight, what you need to do to make sure you got proper load security, what have you done and what can we do to help you?”
While a broker can be an excellent ally, you shouldn’t just choose the first one in the phone book. Peabody’s advice is to look for one who is experienced and has a lot of clients in the trucking industry, a sentiment echoed by Singer. “Make sure your broker already insures other firms in your industry and has access to several larger insurance companies,” she said.

The bottom line in controlling your insurance costs is that it isn’t much different from all the other things you need to do to ensure your business succeeds. It all comes down to having and maintaining good hiring practices, ensuring you have good policies, and being transparent about your operations — with a little, old fashioned blowing of your own horn thrown in for good measure. “Promote yourself to your insurance company,” Singer said. “Show them your track record, your policies and procedures, what kind of company you are. If you have a safety program and letters of reference from your customers and people know you, they actually give you a rate based on that instead of just plugging you into a computer.”

Lou Smyrlis

With more than 25 years of experience reporting on transportation issues, Lou is one of the more recognizable personalities in the industry. An award-winning writer well known for his insightful writing and meticulous market analysis, he is a leading authority on industry trends and statistics.

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